REUTERS

* Exploration can proceed after U.S. drilling expansion

* ConocoPhillips spent $506 million on leases

By Kristen Hays

HOUSTON, March 31 (Reuters) – Oil companies with their sights on drilling for oil off Alaska on Wednesday said President Barack Obama’s offshore oil announcement allows them to press ahead with big projects there.

The Chukchi, between northwest Alaska and northeastern Siberia, is believed to hold 15 billion barrels of recoverable oil and 76 trillion cubic feet of natural gas, according to U.S. government estimates.

(Editing by Lisa Shumaker)

REUTERS ARTICLE

Motorists queue at Shell station to get petrol. Photo/CHRIS OJOW

By ZEDDY SAMBU
Posted Thursday, April 1 2010 at 00:00

Kenya Shell employees on Thursday started a two-day go slow, protesting against lack of formal communication on reports that the firm was leaving the Kenyan market.

The employees, who donned black and red outfits, prompted the firm’s executives to hold an emergency meeting to try and calm the nerves of the restless staff.

Players in the oil market reckon that OiLibya is the front runner to snap up the assets at an estimated price of $2 billion (about Sh152 billion) for Shell’s African operations.

Sources at the firm said the executives promised that a formal communication over the fate of Shell’s interests would be made today at 1 pm through a video conference addressed by regional Vice-President for North and East Africa George Brunton from Johannesburg.

The employees were concerned over their fate and compensation benefits in the event the firm bolts out.

“There has been a lot of anxiety surrounding reports about the planned sale. Today, employees wanted to know their future stay and there was a meeting to address them,” said a senior executive at the firm who requested not to be named.

Questions over whether Kenya Shell will continue to operate in the country deepened on March 16 after its parent company, Royal Dutch Shell, announced it would exit more than a third of its current fuel distribution and marketing operations.

Royal Dutch Shell, in its annual brief to investors, stated that it planed to exit from 35 per cent of its current downstream businesses, with 20 of 24 Africa retail outlets targeted.

However, the firm added that it would boost its presence in South Africa and Egypt, further putting doubts over its stay in Kenyan — which has in recent years witnessed the exit of multinationals Chevron, BP, Mobil, Esso and Agip because of low profit margins.

“Downstream continues to focus on profitability, with plans to exit 15 per cent of refining capacity and 35 per cent of retail markets, and growth investment to enhance the quality of manufacturing and marketing portfolios,” said chief executive Peter Voser in the report, adding that 5,000 employees would be leaving the company as part of restructuring.

In 2008, Shell left 15 African countries saying that it wished to concentrate on its remaining operations.

The firm sold its downstream business in Ethiopia, Sudan and Djibouti to OiLibya.

Officials at OiLibya Kenya declined to comment on the issue as managing director Kamel Jarnaz, who is authorised to speak for the firm, is currently out of the country.

SOURCE ARTICLE

Los Angeles Times: Shell refineries reach Clean Air Act settlements

By Associated Press

March 31, 2010 | 12:02 p.m

ST. ROSE, La. (AP) — Two Shell chemical companies have agreed to install $6 million in pollution reduction equipment at two petroleum refineries in Louisiana and Alabama and upgrade a terminal in Puerto Rico as part of a Clean Air Act settlement with the federal government.

Shell Chemical LP and Shell Chemical Yabucoa, units of Royal Dutch Shell PLC, also will pay a combined $3.3 million civil penalty to the federal government, Alabama and Louisiana.

About $193,000 will go to Louisiana organizations for environmental education, teacher workshops and emergency operations.

The new pollution control equipment will be installed at Shell Chemical refineries in St. Rose, La., and Saraland, Ala.

The settlement was announced Wednesday by the Justice Department and the Environmental Protection Agency.

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REUTERS

HOUSTON, March 31 (Reuters) – Royal Dutch Shell (RDSa.L) on Wednesday started up its new Perdido oil and gas platform in the Gulf of Mexico, the world’s deepest offshore drilling and production facility.

Royal Dutch Shell (RDSa.L) Perdido, 100,000 barrels of oil per day, 200 million cubic feet per day of gas, the first producing platform in the Lower Tertiary, a frontier area in the deepest waters of the Gulf and furthest from shore; Mars, 160,000 barrels of oil per day, 121 million cubic feet of gas.

SOURCE REUTERS ARTICLE

AlaskaDispatch

Royal Dutch Shell, which has spent several billion dollars trying to advance its offshore oil program off Alaska’s northern coast, heralded a decision by President Obama to allow exploration and drilling to continue.

The decision takes Bristol Bay leases off the table and may not lead to additional Arctic leases. But the decision does allow development of existing leases, including Shell’s in the Beaufort and Chukchi seas.

Federal waters off Alaska’s northern shores hold an estimated 25 billion barrels of oil and 120 trillion cubic feet of natural gas. Offshore oil development in federal waters is important to Alaska and generally seen as a solution to declining oil production from aging North Slope fields, like Prudhoe Bay. Without new oil production, the 800-mile trans-Alaska pipeline could reach a point in the next decade where flow is too low to continue operations, cutting off North Slope development and, in turn, the source of some 90 percent of state revenue.

Shell Alaska has spent several billion dollars on leases, icebreakers and more, all aimed toward firming up oil and gas estimates and leading to production. Vice president Pete Slaiby has said the company has spent $40 million alone to keep a 2010 exploration season in play, pending permitting and resolution of several legal challenges.

A statement issued Wednesday by Shell Alaska spokesman Curtis Smith indicates the company still plans to drill in 2010, pending air-quality permits from the Environmental Protection Agency. Here’s Smith’s full statement:

As many of you recall, in April of 2009, the D.C. Court of Appeals found a single specific analytical defect in the 2007-2012 OCS Leasing Program under which Shell purchased 275 lease blocks in the Chukchi Sea. As a result of the ruling, the Court required the Department of Interior (DOI) to conduct a more complete environmental sensitivity analysis to determine whether certain areas should be excluded from the 5-Year OCS Leasing Plan.

On March 31, 2010, Department of Interior Secretary Ken Salazar completed the work required by the D.C. Court of Appeals and published a revised Proposed 2007-2012 OCS Leasing Program that continues to include the Chukchi Sea leases Shell purchased in 2008 for over $2.1 Billion. The revised Proposed Program will now be published for a 30-day public comment period after which the Secretary will take public comments into consideration and then publish the revised Final Program.

Shell appreciates the work by Secretary Salazar and the MMS to complete this process, which combined with the conditional approval of our Chukchi Plan of Exploration, means we can continue to plan for success in the Alaska offshore and eventually bring much-needed U.S. production on-line. That timeline starts after we drill our first well.

Today’s announcement by President Obama and Secretary Salazar acknowledges that responsible oil and gas exploration can take place in the Arctic. It also highlights the need for Shell to secure final air discharge permits from EPA Region 10. The issuance of draft Chukchi and Beaufort air permits earlier this year started a timeline of events that will ultimately dictate Shell’s drilling plans for 2010. As of today, we are still planning to drill in 2010 and remain optimistic that our final Chukchi and Beaufort Sea air permits will be issued soon.

For our part, we have been shovel-ready since 2007. Shell has already completed three years of successful seismic acquisition in the Chukchi and Beaufort Seas – areas that could be home to some of the most prolific, undiscovered hydrocarbon basins in the US. We believe the oil and gas reserves in the Alaska offshore could play a major role in reducing our dependence on foreign oil, increase the tax base, provide thousands of jobs for Alaskans and help extend the life of the Trans-Alaska Pipeline.

Finally, while we respect the Secretary’s decision to remove the North Aleutian Basin from future lease sales, we remain confident that we have the experience and technology needed to operate safely and responsibly in sensitive offshore theaters throughout the world – including the North Aleutian Basin. We are disappointed for Alaskans closest to the region who have worked tirelessly over the last several years to make OCS exploration a reality in southwest Alaska.

SOURCE ARTICLE

DOW JONES NEWSWIRES

Royal Dutch Shell PLC (RDSA, RDSA.LN) has agreed to pay $3.5 million in penalties and spend an estimated $6 million to install pollution-reduction equipments at three U.S. refineries to reduce harmful air emissions.

The equipment is intended to cut output of sulfur dioxide and nitrogen oxides by more than 1,450 tons a year at the facilities in Louisiana, Alabama and Puerto Rico.

Assistant Attorney General Ignacia Moreno said the settlement is an example of businesses’ effort to comply with government environmental regulations. “We will continue to work with industry to achieve compliance under the Clean Air Act to remove harmful pollution from the air we breathe,” she added.

-By Jodi Xu, Dow Jones Newswires; 212-416-3037; jodi.xu@dowjones.com

(END) Dow Jones Newswires
03-31-101334ET
Copyright (c) 2010 Dow Jones & Company, Inc.

By Brian Swint and Brett Foley

March 31 (Bloomberg) — Oil companies may struggle to unload their excess refining capacity in Europe this year as profits from turning crude into fuel stay depressed.

Total SA, Royal Dutch Shell Plc and Chevron Corp. are seeking to sell refineries in Europe after the recession reduced demand. Eni SpA Chief Executive Officer Paolo Scaroni said this month it’s “impossible” to find buyers after refining profit margins slumped to a 15-year low in December.

The desire to cut capacity highlights oil companies’ shift toward China and India for growth as demand for fuel slips in Europe and North America. BP Plc Chief Executive Officer Tony Hayward, whose company sold at least 10 refineries in the past decade, has said that mature markets will never again consume as much gasoline as they did in 2007.

“It will be very difficult to get a decent price, there are just too many sellers,” said Gudmund Halle Isfeldt, an Oslo-based analyst at DnB NOR ASA, Norway’s largest bank. “Both the U.S. and Europe are in structural decline when it comes to these products. The refining market will be difficult for the next three years.”

The International Energy Agency on March 12 raised its forecast for fuel demand growth in developing countries, led by China and India, to 41.2 million barrels a day and cut its prediction for Europe and the U.S. That’s why Shell and BP have considered joining China Petroleum & Chemical Corp., known as Sinopec, in investing in new refineries in the world’s fastest- growing major economy.

Dismantle Dunkirk

Total SA said March 11 it intends sell a European refinery outside of France with a capacity of about 200,000 barrels a day. The company will shut and dismantle a 137,000 barrel-a-day refinery near Dunkirk, France in its effort to trim confining capacity by about 20 percent.

OAO Gazprom Neft, the oil unit of Russia’s natural-gas exporter, said March 28 that it doesn’t plan to buy Total’s U.K. Lindsey refinery after the Sunday Times of London reported that it was up for sale.

If buyers can’t be found, companies can close them, use them for storage or wait to sell until refining becomes more profitable. Shell, which has been negotiating with India’s Essar Oil Ltd. since August to sell three refineries in Europe, said this month it may convert others into terminals. Eni said last month that its Livorno refinery is no longer for sale after it had been on the market for more than a year.

‘Lowball Bid’

“Sellers, especially the majors, aren’t going to panic and hit a lowball bid,” said Ryan Kauppila, a refining analyst at Nomura International Plc. “But there is an opportunity for willing buyers to acquire assets at very attractive prices. We’ll see some transactions by year-end.”

PetroChina Co., the world’s biggest company by market value, may acquire Ineos Group Holdings Plc’s Grangemouth facility in Scotland, Chairman Jang Jiemin said on March 5. The company will spend at least $60 million in the next decade on overseas acquisitions, he said this week.

“The ones that people will want to buy tend to be coastal refineries with lots of storage capacity,” said Lydia Rainforth, an analyst at Barclays Capital in London. “The smaller, less efficient capacity will have to shut and will get moved over toward the Middle East and Asia.”

Valero Energy Corp., the largest U.S. independent refiner, said March 9 it will consider buying the Pembroke refinery in Wales that Chevron Corp. said it plans to sell. At the same time, Valero is selling assets in the U.S.

Delaware City

The company is in “advanced” negotiations to sell its closed refinery in Delaware City, Delaware, to PBF Investments LLC, the investment arm of Petroplus Holdings AG, Valero said Jan. 22. PBF is a partnership with private equity firms Blackstone Group and First Reserve Corp.

“Refinery valuations in the U.S. have fallen further than they have here in Europe, so we may have further to drop here before people start buying,” said David Waring, head of oil and gas banking at Lexicon Partners in London. “Sellers are still not being realistic about expectations on price.”

Sellers may improve their bargaining position if profitability continues to pick up. Margins for turning crude into fuels rose 98 percent to $2.95 per barrel in the quarter to March 25, according to BP’s Global Indicator Margin. That compares with the 15-year low of $1.49 in the fourth quarter and $6.20 in the first quarter of last year.

“Margins can be strong for a period of time, but it’s a very seasonal and very cyclical industry,” said Barclays’s Rainforth. “Companies are taking this decision because they think we’re not going back to the golden age of refining.”

–Editor: Will Kennedy, Stephen Cunningham.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net; Brett Foley in London at bfoley8@bloomberg.net.

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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THE WALL STREET JOURNAL

MARCH 30, 2010

By AMOL SHARMA

MUMBAI—Indian conglomerate Essar Group will decide by June whether to move forward with the purchase of three European oil refineries from Royal Dutch Shell PLC as part of its global expansion plans, the company’s chief executive said.

The companies extended their exclusive talks in November without specifying a time frame. Essar Group CEO Prashant Ruia said the company is studying whether the deal makes sense now, given the low refining margins globally in the oil business.

The company decided “that we would like to wait a while and study it,” Mr. Ruia said in an interview. “It’s something we want to be 100% sure about when we do it. We’ve already done a lot of homework on the transaction.”

Acquiring the Shell refineries, which are in the U.K. and Germany and can process 500,000 barrels of crude oil per day, would move Essar closer to its target of handling one million barrels per day in coming years. Essar currently operates a 280,000-barrel-per-day refinery in Western India. Larger rival Reliance Industries Ltd. already handles 1.24 million barrels per day at its Indian refineries.

Oil companies world-wide are struggling with low profit margins due to depressed demand for fuel. That is why majors like Shell and Chevron Corp. have put some refinery assets on the block. Indian companies such as Essar and Reliance are using the opportunity to scout for assets overseas and build a global footprint that will help them sell into markets in Europe and Africa when prices rebound.

“We are totally convinced that the margins that are so low right now won’t stay there. We do believe they’ll rise,” Mr. Ruia said.

Mumbai-based Essar, which started out as a small Ruia family construction company in the late 1960s, has transformed itself into a conglomerate with interests in oil, power, steel, shipping and telecommunications and $15 billion in annual revenue. It has been one of India’s most active acquirers of overseas companies in recent years, with purchases of steel, outsourcing and coal-mining companies in North America.

Essar is also considering listing an entity including its oil and power businesses on the London Stock Exchange to raise $2 billion to $3 billion in what would be the largest overseas listing by an Indian company, people familiar with the situation said. The company intends to complete the listing this year, if possible, but some potential investors think Essar’s roughly $10 billion valuation for the assets is high, the people said.

Mr. Ruia said the company hasn’t completely made up its mind on whether to follow through with the listing, but said raising equity isn’t necessary to complete the Shell deal. A deal for Shell’s refineries could be valued as high as $1.5 billion, but Essar may contribute some equity from its domestic oil business to lower the price tag, according to a person familiar with the situation.

“We have the ability to go out and do that transaction without waiting for capital to be raised,” Mr. Ruia said. He said Essar is looking to raise new capital, however, for its roughly $8 billion expansion plans in India.

The company intends to boost its domestic refinery operations to 360,000 barrels per day by March 2011, and 720,000 barrels in a later phase. It is also rapidly expanding its power business, with plans to increase its generation capacity from 1,200 megawatts to 6,000 megawatts by 2012. Mr. Ruia said the company could also opt to raise equity in India if family members choose to dilute their large shareholdings in various Essar businesses.

The Ruias own more than 84% of shares in all group companies.

Write to Amol Sharma at amol.sharma@wsj.com

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Shell’s reputation was besmirched by the conduct of its New Zealand executives, whose court testimony Justice Wild rejected as unreliable.